Are you ready to launch a bajillion-dollar startup? Before you start: Are you planning to build a centaur, a unicorn or perhaps a decacorn?
Startup pitching has become an existential drama, in part because so many founders exaggerate the size of the total addressable market (TAM) in which they hope to compete.
At TechCrunch Disrupt, I spoke to three investors about how they use TAM to guide their decision-making. Everyone agreed that the number itself is far less important than the process that produced it.
“The way it’s calculated and the way the founder is thinking about it tells us not necessarily about the business or its future, but about how the founder thinks about company creation,” said Deena Shakir, a partner at Lux Capital.
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“It is almost guaranteed you’re going to be wrong,” said Aydin Senkut, the founder and managing partner of Felicis Ventures. “It’s either going to be too large or too small.”
Kara Nortman, a managing partner at Upfront Ventures, said the TAM numbers given in a pitch do not control whether she’s likely to invest.
“I would say [it is] more important to be able to articulate how big something can become and to show that you have a thought process around TAM, if it’s early,” she said.
Choosing a mythical TAM won’t put dollar signs in investors’ eyes, as unrealistic numbers reflect unrealistic expectations, a red flag for any VC.
As Senkut said, “the plan doesn’t have to be accurate — the plan has to be directionally correct.”
Thanks very much for reading TC+ this week!
Walter Thompson
Editorial Manager, TechCrunch+
@yourprotagonist
What investors really think about the TAM slide in your pitch deck
3 investors explain how finance-focused proptech startups can survive the downturn
How are finance-oriented property tech investors reacting to the ongoing downturn in public markets?
Senior reporter Mary Ann Azevedo interviewed three VCs to learn more about how they’re counseling the companies in their portfolios, which types of startups are best positioned to weather the downturn and how they’re managing risk:
- Pete Flint, general partner, NFX
- Zach Aarons, co-founder and general partner, MetaProp
- Nima Wedlake, principal, Thomvest Ventures
How Metafy founder Josh Fabian caught the attention of 776 by building in public
At TechCrunch Disrupt, Josh Fabian, CEO of video game coaching platform Metafy, explained why he’s committed to “building in public,” or sharing aspects of his founder’s journey with an audience.
“Consumers don’t trust corporations; I don’t trust corporations,” he said. “I don’t think any of you do, even if you’re running your own.”
Katelin Holloway, a founding partner at 776 (an investor in Metafy), said Fabian’s approach was a breath of fresh air. “We were able to just engage and talk like humans, and Josh told us his story in a very different way,” she said.
“Not only was it incredibly compelling from a business perspective, it was incredibly compelling from a human perspective,” she said.
How Metafy founder Josh Fabian caught the attention of 776 by building in public
Is the modern data stack just old wine in a new bottle?
Before Ashish Kakran became a principal at Thomvest Ventures, he was a data engineer who transformed disparate consumer data points into optimized offers for consumer telecoms.
“Part of my job involved unpacking encrypted data feeds, removing rows or columns that had missing data and mapping the fields to our internal data models,” he writes in a TC+ guest post. “Our statistics team then used the clean, updated data to model the best offer for each household.”
Because today’s datasets contain exponentially more information, “the rules are being rewritten on how data will be used for competitive advantage, and it won’t be long before the winners emerge,” he asserts.
In a deep dive, he compares modern and legacy data stacks to identify key trends for enterprises and opportunities for founders and investors.
“Practitioners are spoilt for choices when building enterprise data pipelines,” says Kakran.
Investor’s advice during a downturn: Don’t panic
Fewer investors are writing checks these days, but what kind of advice have they been giving their portfolio companies in recent months?
Mary Ann Azevedo spoke to three executives at TechCrunch Disrupt to learn more about the strategies they’re promoting to preserve runway and their peace of mind.
- Eric Glyman, CEO, Ramp
- Thejo Kote, CEO, Airbase
- Ruth Foxe Blader, partner, Anthemis
“It behooves everybody to be really lucid about the macro environment that we’re entering,” said Blader. “It’s likely to be long-lived, and it’s very important to be judicious but not lose sight of your goals and the reason you founded the business in the first place.”
6 key metrics that can help SaaS startups outlast this downturn
The most successful companies I’ve worked at fostered parasocial relationships with customers in much the same way many of us invest emotional energy while following the lives of celebrities.
During a downturn, “the goal is to pick up on warning signs early and course-correct as you go, and those signs are often hidden in the breadcrumbs,” writes Sudheesh Nair, CEO of ThoughtSpot.
“Not all industries are affected equally, so don’t assume your customers will cut spending this year just because the headlines are bleak.”
6 key metrics that can help SaaS startups outlast this downturn
Tips for e-commerce brands that want to win more market share this holiday season
Santa Claus makes a list and checks it twice before each holiday season. Can your e-commerce startup make the same claim?
“Consumers are now living with inflation and an unofficial recession, and we can expect more selective and price-conscious shopping behavior,” writes Guru Hariharan, CEO and founder of CommerceIQ.
Now that people “are feeling the squeeze on their everyday essential purchases” and the holiday shopping season is starting earlier, “companies will need to be ready to shift their strategy for discounting, inventory planning and ad marketing spend as the environment changes.”
Tips for e-commerce brands that want to win market share this holiday season
Dear Sophie: How can students work or launch a startup while maintaining their immigration status?
Dear Sophie,
I’m studying bioinformatics at a university in the U.S.
What options do I have to work before and after graduation on my student visa? Do any of these options allow me to launch my own startup?
— Wanting to Work
Dear Sophie: How can students work or launch a startup while maintaining their immigration status?
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